Saudi Arabia to lead regional IPO activity in 2018: EY

Initial public offering (IPO) activity in the Middle East and North Africa (MENA) region is poised for stronger growth in 2018, with Saudi Arabia being the bright spot, consultancy firm EY said in a new report on Wednesday.

"The IPO market in Saudi looks buoyant with major regulatory reforms underway, and the impending public listing of Saudi Aramco, Saudi Exchange, and other large government-related entities," the consultancy said.

"Tadawul is also on its course to join MSCI’s emerging market index and has been swift in improving the regulatory environment and allowing foreign investments to be in line with global standards," it added.

In Q4 2017, Tadawul raised $110 million from listing of AlAhli REIT Fund 1. However, the Kingdom’s parallel market, Nomu, saw a decline of 48 percent in 2017 with no IPOs in Q3 and Q4 2017.

Since September 2015, Saudi Arabia's Capital Market Authority (CMA) has undertaken numerous key market reforms, such as changing the settlement period to T+2 from T+0, reducing the qualifications requirements for QFIs, amending foreign ownership limits, and moving to IFRS accounting standards.  

“The CMA’s recent updates could encourage more small and mid-cap companies to go public in 2018, leading to a rebound in IPO listings on Nomu alone,” said Mayur Pau, MENA Financial Services IPO Leader at EY.

"The IPO activity pipeline for the UAE, Kuwait, and Egypt also looks promising with major government-owned firms announcing their plans to go public within the next two years. The ADNOC IPO is one of the most successful regional issuances in recent times and it is likely to pave the way for more public listings from the MENA energy sector,” he added.

The MENA region witnessed eight IPO deals in Q4 2017, representing a 60 percent surge in volume year-on-year. Total capital raised amounted to $2.5 billion, over ten times the capital raised last year and the highest since 2014.

The UAE led the MENA IPO market in value, having raised a cumulative of $2.2 billion in capital, primarily contributed by the Emaar Development IPO ($1.3 billion) and ADNOC IPO ($850.9 million).

In Oman, the Muscat Securities Market recorded the highest number of listings with three IPO deals during Q4, raising a combined capital of $81.9 million.

"MENA IPO activity is expected to gain momentum in 2018 bolstered by economic reforms and privatization drive of countries such as Saudi Arabia and Egypt," the report said on the back of improved oil prices, favorable government initiatives and strong investor appetite.

Separately, activity in the global IPO market surged last year with the listing of 1,624 deals, raising a total capital of $188.8 billion.  

"This made 2017 the most active year for IPOs since 2007, and the global IPO market is projected to grow even further in 2018. This will positively impact the regional IPO landscape," EY noted.